Form N-1A Supporting Statement (Investor Experience)

OMB CONTROL NUMBER: 3235-0307
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-1A
A. JUSTIFICATION
1.

Necessity for the Information Collection

Form N-1A (17 CFR 239.15A and 274.11A) is the form used by open-end
management investment companies (“funds”) to register under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (“Investment Company Act”)
and/or to register their securities under the Securities Act of 1933 (15 U.S.C. 77a, et
seq.) (“Securities Act”). Section 5 of the Securities Act (15 U.S.C. 77e) requires the
filing of a registration statement prior to the offer of securities to the public and that
the statement be effective before any securities are sold, and Section 8 of the
Investment Company Act (15 U.S.C. 80a-8) requires a fund to register as an
investment company. Form N-1A also permits funds to provide investors with a
prospectus and a statement of additional information (“SAI”) covering essential
information about the fund when it makes an initial or additional offering of its
securities. Section 5(b) of the Securities Act requires that investors be provided with a
prospectus containing the information required in a registration statement prior to
the sale or at the time of confirmation or delivery of the securities.
On August 5, 2020, the Commission proposed rule and form amendments that
would modernize the disclosure framework for open-end management investment
companies. 1 The Commission proposed several amendments to Form N-1A,
including: 1) amendments to the fee table and fee expense terminology; 2) revisions
to the form’s risk disclosures; and 3) eliminating the legend required by rule 30e-3 on
fund prospectuses stating that shareholder reports will eventually be available online
and no longer will be sent to shareholders. These amendments are designed to
modernize risk and fee disclosure in fund prospectuses. Additionally, the
Commission proposed to amend the scope of rule 30e-3 to exclude open-end funds,
and the proposed elimination of the rule 30e-3 legend on fund prospectuses is a
conforming change accompanying the proposed amendment to the rule’s scope.
2.

Purpose and Use of the Information Collection

The title for the collection of information is: Form N-1A under the Investment
Company Act of 1940 and Securities Act of 1933, Registration Statement of OpenEnd Management Investment Companies. The purpose of Form N-1A is to meet the
filing and disclosure requirements of the Securities Act and the Investment Company
Act and to enable funds to provide investors with information necessary to evaluate
an investment in the fund. Unlike many other federal information collections, which
1

Tailored Shareholder Reports, Treatment of Annual Prospectus Updates for Existing Investors,
and Improved Fee and Risk Disclosure for Mutual Funds and Exchange-Traded Funds; Fee
Information in Investment Company Advertisements, Securities Act Release No. 10814 (Aug. 5,
2020) available at https://www.sec.gov/rules/proposed/2020/33-10814.pdf.

are primarily for the use and benefit of the collecting agency, this information
collection is primarily for the use and benefit of investors. The information filed with
the Commission also permits the verification of compliance with securities law
requirements and assures the public availability and dissemination of the
information.
3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis
and Retrieval or “EDGAR”) is designed to automate the filing, processing and
dissemination of full disclosure filings. The system permits publicly held companies
to transmit their filings to the Commission electronically. EDGAR has increased the
speed, accuracy and availability of information, generating benefits to investors and
financial markets. All funds have been required to use EDGAR for their disclosure
filings since November 6, 1995. Form N-1A is required to be filed with the
Commission electronically on EDGAR. 2 The public may access filings on EDGAR
through the Commission’s website (http://www.sec.gov) or at EDGAR terminals
located at the Commission’s public reference rooms. Prospectuses and SAIs may be
sent to investors by electronic means so long as the fund meets certain requirements. 3
4.

Efforts to Identify Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication and reevaluates them whenever it proposes a rule or a
change in a rule. The requirements of Form N-1A are not generally duplicated
elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 4 to identify methods to minimize recordkeeping or reporting
requirements affecting small businesses. The current disclosure requirements for
registration statements on Form N-1A do not distinguish between small entities and
other investment companies. The burden on smaller investment companies of
preparing and filing registration statements may be proportionately greater than for
larger investment companies. This burden includes the cost of producing, printing,
filing, and disseminating prospectuses. The Commission believes, however, that
imposing different requirements on smaller investment companies would not be
consistent with investor protection and the purposes of the registration statement
requirements.

2

17 CFR 232.101(a)(1)(i) and (iv).

3

See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233,
Exchange Act Release No. 36345, Investment Company Act Release No. 21399
(Oct. 6, 1995) (60 FR 53458 (Oct. 13, 1995)).

4

5 U.S.C. 601 et seq.

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6.

Consequences of Not Conducting Collection

The purpose of Form N-1A is to meet the filing and disclosure requirements of
the Securities Act and the Investment Company Act and to enable filers to provide
investors with information necessary to evaluate an investment in the security. Less
frequent filing would be inconsistent with the filing and disclosure requirements of
the Securities Act and the Investment Company Act. In addition, if the form were to
be filed less frequently, investors may not be provided with the information necessary
to evaluate an investment in the security.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

The Commission and the staff of the Division of Investment Management
participate in an ongoing dialogue with representatives of the investment company
industry through public conferences, meetings, and informal exchanges. These
various forums provide the Commission and staff with a means of ascertaining and
acting upon paperwork burdens confronting the industry. In addition, the
Commission has requested public comment on the proposed amendments to Form
N-1A, including the collection of information requirements resulting from the
proposed amendments. Before adopting these amendments, the Commission will
receive and evaluate public comments on the proposed amendments and their
associated collection of information requirements.
9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be
required under this collection of information. The information collection collects
basic Personally Identifiable Information (PII) that may include names, job titles and
work addresses. However, the agency has determined that the information collection
does not constitute a system of record for purposes of the Privacy Act. Information
is not retrieved by a personal identifier. In accordance with Section 208 of the EGovernment Act of 2002, the agency has conducted a Privacy Impact Assessment
(PIA) of the EDGAR system, in connection with this collection of information. The
EDGAR PIA, published on January 29, 2016, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy.

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12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 5 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission
rules and forms. In our most recent Paperwork Reduction Act submission for Form
N-1A, we estimated for Form N-1A a total hour burden of 1,672,077 hours, and the
total annual external cost burden is $132,940,008. 6 Compliance with the disclosure
requirements of Form N-1A is mandatory, and the responses to the disclosure
requirements will not be kept confidential. The table below summarizes our PRA
initial and ongoing annual burden estimates associated with the proposed
amendments to Form N-1A.
Table 1: Burden Estimates for Initial and Ongoing Registration Statements Filed on
Form N-1A
Initial hours
Revise fee table and fee
and expense terminology

Revise risk disclosures

Remove rule 30e-3
legend6

Internal time
costs

Annual hours1

Wage rate2

9 hours3

5 hours4

$336
(blended rate for
compliance attorney and
senior programmer)

$1,680

18 hours

hours5

$336
(blended rate for
compliance attorney and
senior programmer)

$3,360

$336
(blended rate for
compliance attorney and
senior programmer)

-$110.88

-1 hour

10

×

-0.33 hours

Total new annual burden
per fund

14.67 hours

$4,929.12

Number of funds

× 12,410
funds7

× 12,410 funds

Total new annual burden

182,054.7
hours

$61,170,379.2

Annual external
cost burden

$0

TOTAL ESTIMATED BURDENS INCLUDING AMENDMENTS
Current burden estimates

Revised burden estimates

+ 1,672,077
hours

+ $132,940,008

1,854,131.7
hours

$132,940,008

Notes:
1. Includes initial burden estimates annualized over a 3-year period.
2. The Commission’s estimates of the relevant wage rates are based on salary information for the securities industry compiled by the
Securities Industry and Financial Markets Association’s Office Salaries in the Securities Industry 2013. The estimated figures are
modified by firm size, employee benefits, overhead, and adjusted to account for the effects of inflation. See Securities Industry and
Financial Markets Association, Report on Management & Professional Earnings in the Securities Industry 2013.
5

44 U.S.C. 3501 et seq.

6

This estimate is based on the last time the rule’s information collection was submitted in
2020.

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3. This estimate is an average estimate across all Form N-1A registrants.
4. Includes initial burden estimates annualized over a three-year period, plus 2 hours of ongoing annual burden hours. The estimate of 5
hours is based on the following calculation: ((9 initial hours /3) + 2 hours of additional ongoing burden hours) = 5 hours.
5. Includes initial burden estimates annualized over a three-year period, plus 4 hours of ongoing annual burden hours. The estimate of
10 hours is based on the following calculation: ((18 initial hours /3) + 4 hours of additional ongoing burden hours) = 10 hours
6. This amendment will decrease the burdens associated with Form N-1A.
7. Includes all open-end funds, including ETFs, registered on Form N-1A.

13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and amend
registration statements on Form N-1A, such as for the services of independent
auditors and outside counsel. The cost burden does not include the hour burden
discussed in Item 12 above. Estimates are based on the Commission’s experience
with the filing of registration forms.
As summarized in Table 1 above, in our most recent Paperwork Reduction Act
submission for Form N-1A, Commission staff estimated about $132,940,008 in
external cost burden per year. We believe that the proposed amendments will not
change the external cost burdens of Form N-1A.
14.

Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including
new registration statements, post-effective amendments, proxy statements,
shareholder reports, and other filings of investment companies amounted to
approximately $21.2 million in fiscal year 2019, based on the Commission’s
computation of the value of staff time devoted to this activity and related overhead.
15.

Change in Burden

As summarized in Table 1 above, the estimated hourly burden associated with
Form N-1A has increased from 1,672,077 hours to 1,854,131.7 hours (an increase of
182,054.7 hours). In addition, the cost burden associated with Form N-1A has not
changed. The changes in burden hour burdens is due to the estimates of the time
burden that will result from our amendments to Form N-1A requiring revisions to
the fee table, fee and expense terminology, and risk disclosure as well as the
rescission of the legend required by rule 30e-3. These changes in burden also reflect
the Commission’s revision and update of burden estimates for all information
collections under this OMB control number (whether or not associated with
rulemaking changes), and the Commission requested public comment on all
information collection burden estimates for this OMB control number.
16.

Information Collection Planned for Statistical Purposes

The results of any information collected will not be published.

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17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of
the form for design and IT project scheduling reasons. The OMB control number will
be displayed.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

The Commission is not seeking an exception to the certification statement.
B. COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
The collection of information will not employ statistical methods.

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